By on May 20, 2015

Chevron Fuel Prices In Oceanside, California Circa March 2011

While most of the United States enjoys fuel prices under $3 per gallon, the West Coast can’t say the same, especially California.

The average fuel price in the U.S. is currently $2.772/gal. per the AAA, Bloomberg reports, but a combination of factors have pushed California’s average to $3.809.

The first involves a series of refinery shutdowns up and down the West Coast, including an explosion at an Exxon refinery in Torrance, Calif., and a recent fire at a U.S. Oil and Refining facility in Tacoma, Wash. Other units are closed for repairs.

The second is the state’s pipeline network. The one-way system delivers gasoline to Arizona and Nevada, but is otherwise cut-off from other pipeline networks in the U.S. Thus, the only way for the state to receive its fuel supply when the chips are down — a supply specially made for the state’s own set of emission standards — is by tanker deliveries from Asia and Europe.

At present, Los Angeles motorists are feeling the most pain at the pump, paying nearly $4/gal. AAA spokesman Michael Green says prices in the city are rising faster “than anywhere else in the country,” and will remain at the top until late summer.

The regional volatility issues do offer a possible silver lining: The U.S. government is studying how sudden jumps in prices could affect the nation’s economy, and is considering whether to build a fuel reserve for the West Coast in case of major supply disruptions.

[Photo credit: Joe Wolf/Flickr/CC BY-ND 2.0]

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48 Comments on “California Hit By Rising Fuel Prices Due To Supply Issues...”


  • avatar
    RHD

    Good thing crude oil will remain below $100 a barrel for the next decade or so…

  • avatar
    FormerFF

    We had a similar issue here in Atlanta in the aftermath of Hurricane Katrina. All our gasoline comes from the Gulf Coast,and after the heavy weather went thorough, no shipments were being made. Not only did the price go up over $4 but there were significant shortages

    Curious how some of the refineries are “under repairs” in the aftermath of two others having had catastrophic failures. Let me guess, there will be enough gasoline to go around, but it will just be more expensive. This is one of the few industries that has figured out how to get consumers to pay for its mistakes.

    • 0 avatar
      Sigivald

      Aren’t “some refineries” pretty much *always* doing repairs or turnarounds?

      “Curious” that they’d intentionally do that to encourage imports of fuel from Asia that they don’t see a cent of, right?

      Wanna blame a monolithic entity for Californian fuel price woes, blame CARB for requiring a unique blend.

      • 0 avatar
        JohnTaurus_3.0_AX4N

        @ Sigivald +10, spot on.

        Every time gas prices rise, its always some massive conspiricy by evil big oil to pad their pockets, even when there is no benifit for them in any way. Cant you just see them sitting around a giant table in big red leather chairs, smoking cigars lit with $100 bills and planning the next fire, storm/natural disaster, or mechanical breakdown (all the while drowning a few puppies for good measure)? I think I can hear their evil laughing from here.

        No, wait, thats me laughing at people who believe such.

        Do oil companies want to make a profit? Yes. So does every other business, and oil/fuel production is one of the most complex and largest operations being undertaken to do so. Stands to reason that high effort and expenses translate into high profits. If it were easy and cheap, everyone would do it and gasoline would be nearly free. I think we have it pretty good. Gasoline is pretty cheap considering what we get out of it.

        Imagine if suddenly production of gas, diesel, natural gas, etc just stopped everywhere. How else are you going to commute 40 miles a day for just a few bucks? Electric cars? The demand for electricity would be so great that soon youd have to make choices between running appliances and making it to work. If the Obama admin has its way, coal power plants will/would soon cease to exist, and nobody wants nuke plants anymore either. That basicly leaves hydro, wind and solar, none of which are enough to meet current demands, and as I said, the demand for running a nation of exclusively electric cars would be many times what it is today. Then factor in the prices of goods, without fuel to power the trucks that deliver them. Fresh food and other perashables would be a luxury or simply cease to exist for many.

        Complain all you want about big oil, but they make modern life possible and charge very little for it, considering the (very few) alternatives.

        • 0 avatar
          Russycle

          I’m not saying there’s a conspiracy, but if you believe such activity is beyond the pale for corporate executives try googling Enron.

          • 0 avatar
            raph

            Or the recent issues with banks engaged in price fixing of which Bank of America and Citigroup were involved.

        • 0 avatar
          jim brewer

          Crack spreads for California are way way up in the $35 range, while it’s down in the $13 dollar range on the east coast, about the same as last year. It was only $15 last year. The spread is basically the margin between crude and distilled product.

          My theory is that if you see monopoly profits in a commodity product, you are probably looking at anticompetitive behavior.

          • 0 avatar
            FormerFF

            I agree. In a competitive market, I would expect other suppliers to try to grab market share. If the supply is so constrained that one refinery having a problem causes prices to go up this much, I’d certainly say that there is insufficient competition in this market.

    • 0 avatar
      Land Ark

      I’m pretty sure they closed those refineries for some plumbing repairs. They’ll probably be open in 6 months.

    • 0 avatar
      HotPotato

      No doubt there are many contributing factors to prices, but the industry’s practices here smell fishier than the waste bins at the Tokyo sushi market: from Shell shutting down a refinery to “sell” it but setting unsaleable conditions, to refineries being maintained during peak driving season due to “mild weather” in cities where the weather is all but identical 365 days a year. Being a realist =/= being naive.

      That said, solving the pipeline issue could help. So could legislation allowing suspension of the formulation standards when prices spike. So could regionally harmonizing formulations.

      To be clear, the problem isn’t that the state is antah-ohl-bidness. California is one of the nation’s biggest oil producers, has no oil severance tax, and even in the state’s most strictly environmentalist county is soft enough on the industry that we just witnessed another massive preventable oil spill.

  • avatar
    eggsalad

    I live in Las Vegas, and we get all of our gasoline from SoCal. Every time gas prices get too low, there’s a “refinery explosion”, a “maintenance shutdown”, or a “winter/summer changeover”.

    I swear, if any other industry had as many explosions as California refineries claim to, they’d be under investigation.

    • 0 avatar
      Sigivald

      What makes you think that there aren’t investigations after every single explosion?

      There are. (http://www.csb.gov/investigations/)

      People get hurt and killed when it happens – the recent Torrance explosion injured four people.

      Turns out volatile petrochemicals *are volatile*.

      But, yes, please imply that they’re either faked or intentional, to make Vegas pay more for gas.

      (Just like seasonal blend changes aren’t required by local laws, and they totally don’t really change! That’s obviously worthy of “quotes”.

      And nobody ever really needs to “maintain” a giant fractional distillation facility; that’s just an *excuse* to gouge you.
      )

    • 0 avatar
      Mike N.

      Yeah, I’ve noticed that too. Mass waves of regularly scheduled maintenance shutdowns seem to come at the most convenient times. Same thing seems to happen with power plants.

      • 0 avatar
        jhefner

        Yes, both refineries and power plants schedule their maintenance work and the downtime it causes for the spring. The reason is very simple; temperatures are at their mildest, so demand for heating oil and electricity are low; and it is also outside most of the vacation season (except spring break.) It makes sense, and it has been this way going back decades.

        But this year was made worst by the steel workers union strikes; which reduced the amount of labor available to work the maintenance outages (and THAT was on purpose; to put pressure on the oil companies to settle as quickly as possible so maintenance could resume.) The explosions only made things worst.

        The internet sure brings the craziness out of people. No wonder I no longer listen to talk radio, and read much on the web anymore. And neither side has a monopoly on the tinfoil hats.

      • 0 avatar
        JohnTaurus_3.0_AX4N

        It never occured to you that there might be reasons for that?

        We have another expert on our hands, someone who knows that multi-million dollar equipment needs no maintenance. Someone who knows that mechanical breakdowns and accidents are impossible and never occur. It must be nice to have such knowledge on tap so you can tell us all just how bogus all these manufactured excuses are. And dont forget about how profitable importing fuel from other countries (from non-US companies) is for the US oil industry. Must be like how GM makes so much money off the Honda Accord.

        • 0 avatar
          jim brewer

          Delta airlines bought its own refinery for $150 million in 2012 and saves $240 million a year in fuel costs. The purchase caused a 6 point drop in crack spread for jet fuel. The east coast spread right now is only $14.

          Yes, I know that they can tweak production to favor one fuel over another, but only a little.

          Again, this is a commodity industry. There should be no interest in an airline owning it’s own refinery. There should be no massive cost advantage to operating your own refinery, in a competitive environment.

          It’s not a competitive environment.

  • avatar
    Pch101

    You should go back and fact check this article. A majority of California’s oil imports come from the Middle East, and the state is increasingly reliant on foreign imports.

    http://energyalmanac.ca.gov/petroleum/statistics/crude_oil_receipts.html

    What the Bloomberg article seems to be saying is that California imports GASOLINE from Asia when the US refineries are offline, presumably because there are Asian refiners that will make California formulations while many US refiners will not.

  • avatar
    highrpm

    The world is glutted in oil. Swimming in it. Tankers filled with oil are parked all over the world right now.

    Whether another refinery was pumping oil or not should not affect a thing.

    I call BS.

    Like eggsalad and others said, for all of the refinery explosion stories you hear about, California should look like the set of a Mad Max movie.

    • 0 avatar
      Pch101

      Try putting crude oil in your car. It won’t go very far.

      The refinery issues create bottlenecks, which create supply constraints that lead to higher prices. Fuel formulations are a state and local matter, so there are many variants and there is no such thing as 50-state fuel.

      • 0 avatar

        Which is the answer to this question. The crude could be free, but as as long as someone has the hand on the pipeline, for refining, or any other reason, they can set prices.

        The current glut is nice for those of us whose exposure to the oil industry is only at the pumps, but fear not…at some point, the established players will figure out a way to set prices (again)

    • 0 avatar
      JohnTaurus_3.0_AX4N

      You call BS? Then you obviously must know the industry inside and out. You must know exactly how to maintain equipment and how often repairs must be made. So, youre an insider with all the facts to come to such a conclusion.

      Okay, go ahead and refine oil yourself. Drill yourself a well, get the oil, refine it into fuel. If its so simple and easy, why dont you do it? Oh, wait, youd have to go to school for years to learn how, invest millions in equipment, get permits, find the oil and then after many months of labor, you can produce your first gallon. Suddenly, $40 for a tankfull seems like a bargin.

      Calling BS on an industry you know nothing about is like a 4 year old asking why he cant fly to Mars for a vacation. At least he has an excuse, he’s 4 and doesnt understand how things work. Your only excuse is that youre an idiot.

    • 0 avatar
      OneAlpha

      If you want to get metaphorical about it, California pretty much IS a Mad Max movie:

      “My life fades. The vision dims. All that remains are memories. I remember a time of chaos, ruined dreams, this wasted land. But most of all, I remember the road warrior, the man we called Max.

      To understand who he was we have to go back to the other time, when the world was powered by the black fuel and the desert sprouted great cities of pipe and steel — gone now, swept away. For reasons long forgotten two mighty warrior tribes went to war and touched off a blaze which engulfed them all. Without fuel they were nothing.

      They’d built a house of straw. The thundering machines sputtered and stopped. Their leaders talked and talked and talked, but nothing could stem the avalanche.

      Their world crumbled. Cities exploded — a whirlwind of looting, a firestorm of fear. Men began to feed on men.”

      Sounds like California to me.

  • avatar
    28-Cars-Later

    “The average fuel price in the U.S. is currently $2.772/gal. per the AAA, Bloomberg reports, but a combination of factors have pushed California’s average to $3.809.”

    The RBOB futures for June are 2.0412 as of this post. Being nearly $1.80/gal above RBOB and no longer having the distinction of the highest gasoline tax don’t add up. Something’s rotten in the state of Kalifornication. I wonder if there is an Enron like scenario playing out.

    • 0 avatar
      Pch101

      There are very few refineries that provide gasoline that is suitable for California. It’s really that simple.

      • 0 avatar
        28-Cars-Later

        For an additional $1.00/gal after taxes? Cali gas has not always been priced that much higher proportionally speaking.

      • 0 avatar
        FormerFF

        As we found out, it wouldn’t matter whether there was one formulation or 5,000, it is cost efficient for all the gasoline to come through a very limited number of pipelines, so that’s how it’s done. It would be a simple enough matter to temporarily relax the formulation standards, but if there are no pipelines to move the product, it has to come in a tanker from somewhere, either Asia or the Gulf Coast.

        • 0 avatar
          Pch101

          There’s no point in building more pipelines, since there is nothing to import.

          As it is, refining is a low-margin business, so there isn’t much eagerness to add a lot of refinery capacity. The big profits in the oil business are in the upstream (exploring and getting it out of the ground), not in retailing it.

          • 0 avatar
            FormerFF

            I do believe this is where the gov’t needs to step in so that there are at least two sources of oil transport into any given area. If that makes gasoline slightly more expensive, so be it, it’s an essential commodity, and refinery fires and Gulf coast hurricanes aren’t exactly unknown.

          • 0 avatar
            FormerFF

            Oil Refiners Profiting From High “Crack Spread” : http://www.valuewalk.com/2015/04/oil-refiners-crack-spread/

          • 0 avatar
            Pch101

            That is a transitory phenomenon that comes from rapid price decreases. It doesn’t last.

            High prices are generally bad for retailers and refiners, as the higher prices reduce demand.

  • avatar
    50merc

    Let the price of gas go to forty bucks a gallon in California, for all I care. It’d serve the environuts right. And instead of using automobiles to get around, they can always ride their new high-speed railway, right?

  • avatar
    fincar1

    As mentioned in the article, California’s insistence on its own blend of gasoline has always contributed to higher prices in that state.

    Iirc the U. S. Oil refinery in Tacoma that had the recent fire only re-refines waste oil and does not produce any gasoline.

  • avatar
    an innocent man

    Based solely on my annoyance at having to use the new CaliSpec portable gas containers, I say anything bad that happens to that state, they deserve.

    • 0 avatar
      SunnyvaleCA

      Oh, those portable gas containers are truly terrible. I’ve never spilled so much gasoline in my life as when using them. Totally counterproductive.

      As for high prices, we’ve been about $1/gal above the national average for several months now. I wonder if this difference in price would create an opportunity to study how higher prices lead to (or not) people buying more efficient vehicles and/or changing driving habits.

      • 0 avatar
        Hummer

        California’s a bad example for human behavior studies – when we’re trying to figure out U.S. Behavior to fuel prices. People their actually ask for prices to go up for whatever phony banana junk big green tells them, and the government alike to do, the rest of us just shake our heads.

        • 0 avatar
          cal325

          Thats not true for all of us. I want to be able to afford to put gas in my car to drive the canyons. I shake my head at those people too.

          Just so you know most of California is pretty normal. The people in San Francisco and LA ruin it for everyone else

  • avatar
    indi500fan

    Cal also has state Cap & Tax in place.

    That would have been a great strategy for the country as a whole (at least for govt enjoying the revenue without public backlash) as the increasing gas and electricity prices would be blamed on evil big oil and big utilities.

    But when only one state has it, the poor citizen suckers can look across the state borders and realize what is actually happening.

  • avatar

    Due to Liberal, Greener, Environmentalist problems…

    The state is LITERALLY Drying Up.

    Imagine if the idiots used Nuclear Powerplants to desalinate drinkable water while producing electricity.

  • avatar
    stevelovescars

    Environmental regulations have truly made CA a much more livable place in the past 40 years. However, some of the CARB regulations seem to have gone far beyond the point of diminishing returns.

    I have no idea how much of a difference the different gasoline formulation makes in emissions, but I wonder if anyone has really studied it? Would matching the formula used in surrounding states really make any noticeable difference in emissions?

    From a quick search (http://www.arb.ca.gov/fuels/gasoline/faq.htm) I see that the formula most recently adopted by the CARB (in 2007) were aimed primarily at counteracting the effects of evaporative emissions due to the Federal mandate for higher ethanol content in gasoline. Since the entire fleet of cars now has MUCH tighter controls on evaporative emissions today than they have ever had, is this still making any measurable difference?

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